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Aid for Trade Effectiveness: Complementarities with Economic Integration


  • The findings, interpretations and conclusions expressed in this article are entirely mine. I acknowledge funding from the French Development Agency AFD without implicating them; I thank Chantal Le Mouël, Marilyne Huchet-Bourdon, Olivier Cadot, Jaime de Melo, Céline Carrère, Marcelo Olarreaga, Marie-Cécile Thirion, Akiko Suwa-Einsenmann, Laurent Wagner, participants at the 2012 Conference: Aid for Trade: What Have we Learnt? Which way Ahead? as well as an anonymous referee for their helpful comments and suggestions on an earlier version. An appendix with supplementary tables is available in the discussion paper version on the FERDI website.


Developing countries are increasingly using regional integration as a main policy lever when pursuing a trade-led growth strategy, and today, ‘deep’ preferential trade agreements go beyond trade policy negotiations and cover trade facilitation issues. Since aid for trade (AfT) has been recognised as a powerful instrument for increasing developing countries' trade capacity by targeting internal trade costs, this article tests whether complementarities exist between this type of aid and economic integration using a gravity model on panel data for the period 1995–2005. Results indicate that AfT, when combined with economic integration, has been effective in increasing trade flows. Both South–South and North–South trade flows have benefited, and the combination of the two instruments has been particularly effective in expanding the South's exports to the North. Finally, when breaking down AfT into categories, assistance to trade-related institutions seems to generate the strongest complementarities with economic integration.